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Missing Case – Grassing v. Riley, 2020 MBQB 34

On 20 May 2020 I posted a blog entitled “Reducing a Surviving Spouse’s Preferential Share on a Partial Intestacy”.[1] It was a comment on the Manitoba case Grassing v. Riley.[2] Unfortunately, the case seems hard to find as it does not appear to be in any online databases. Since I have had a number of requests about it, I deem it advisable to attach the case to this article as an appendix.

APPENDIX

Date: 20200220

Docket:  PR 18-01-11936

(Winnipeg Centre) Indexed as: Grassing et al. v. Riley Cited as: 2020 MBQB 34

 COURT OF QUEEN’S BENCH OF MANITOBA

IN THE MATTER OF:         The Estate of Allan Stanley Grassing

B E T W E E N: 

JACK ALLAN GRASSING,
MICHAEL PAUL GRASSING,
JORDAN E. SMITH
applicants,

– and –

JUDY LYNN RILEY,
respondent.

APPEARANCES:

STEVEN W. BRENNAN, for the applicants.

MURRAY N. TRACHTENBERG, for the respondent.

Judgment delivered: February 20, 2020

PERLMUTTER A.C.J.Q.B.

 

INTRODUCTION

[1] The applicants seek advice and direction about whether the respondent’s preferential share of the deceased’s estate, to which she is entitled as the deceased’s surviving common-law partner under subsection 2(3) of The Intestate Succession Act, C.C.S.M. c. I85 (the “ISA”), is to be reduced under subsection 2(4) of the ISA, by an amount equal to the value of the benefits she received as the deceased’s designated beneficiary under his Registered Retirement Income Fund (RRIF) and his Tax Free Savings Account (TFSA). These subsections of the ISA provide as follows:

2(3) If an intestate dies leaving a surviving spouse or common-law partner and issue, and one or more of the issue are not also issue of the surviving spouse or common-law partner, the share of the surviving spouse or common- law partner is

(a) $50,000., or one-half of the intestate estate, whichever is greater; and

(b) one-half of any remainder of the intestate estate after allocation of the share provided by clause (a).

2(4) The maximum entitlement set out in clause (3)(a) shall be reduced by an amount equal to the value of any benefits received by the surviving spouse or common-law partner under a will of the deceased. [Underlining with emphasis added]

[2] If there is to be such a reduction, the parties also seek advice and direction about whether this reduction is subject to potential future tax liability relative to the RRIF.

BACKGROUND

[3] The deceased died intestate on August 13, 2016. The applicants are his only surviving children and the respondent is his surviving common-law partner. At the time of his death, in addition to other property, the deceased held a RRIF and a TFSA, for which he designated the respondent as his beneficiary upon his death.

[4] These beneficiary designations were included in the deceased’s application documents that he completed and signed prior to his death for each of the RRIF and the TFSA. Following his death, the respondent received the funds from his RRIF and

ISSUE

[5] There is no dispute that, as the deceased’s surviving common-law partner, the respondent is entitled to a preferential share of the deceased’s estate calculated in accordance with subsection 2(3) of the ISA. However, the issue before me is whether this entitlement is to be reduced under subsection 2(4) of the ISA, by the amount equal to the value of the benefits received by the respondent from the deceased’s RRIF and TFSA. If there is to be such a reduction, the related issue is whether this reduction is subject to potential future tax liability relative to the

PARTIES’ POSITIONS

[6] It is the applicants’ position that the respondent’s entitlement to a preferential share should be reduced under subsection 2(4) of the ISA, by an amount equal to the value of the benefits that she received as the designated beneficiary of the deceased’s RRIF and TFSA. They say that these funds are benefits received by her “under a will of the deceased” as that expression was intended under subsection 2(4) of the ISA. It is the respondent’s position that her entitlement is not to be reduced because these funds are not benefits received by her “under a will of the deceased”. Rather, the respondent says that the RRIF and TFSA are each a “plan” and the benefits that she received from the RRIF and the TFSA are pursuant to “instruments” signed by the deceased, as defined under The Beneficiary Designation Act (Retirement, Savings and Other Plans), C.S.M. c. B30 (the “BDA”), and not a “will”.

ANALYSIS

Were the RRIF and TFSA funds “benefits received by [the respondent] under a will of the deceased”? 

[7] As is apparent, pivotal to my determination is whether the funds received by the respondent as the designated beneficiary of the deceased’s RRIF and TFSA were benefits received by her “under a will of the deceased”.

[8] The ISA does not define the term “will”.

[9] The Wills Act, C.C.S.M., c. W150 (the “Wills Act”), in section 1, defines a “will” as follows:

“will” includes a testament, a codicil, an appointment by will or by writing in the nature of a will in exercise of a power and any other testamentary disposition. [Underlining with emphasis added]

[10] The BDA provides in section 1, that “will” has the same meaning as in the Wills Act.

[11] The applicants argue that the beneficiary designation under each of the RRIF and TFSA is a “testamentary disposition” and therefore is a will based on the definition of “will” in the Wills Act and for the purpose of subsection 2(4) of the ISA. They rely on the following distinguishing features of a testamentary disposition:

  • “a deliberate, fixed and final expression as to the disposition of the property of the deceased on her death” (Canada Permanent Trust Co. et al. v. Bowman et al., [1962] S.C.R. 711, at p. 715); and
  • “It is undoubted law that whatever may be the form of a duly executed instrument, if the person executing it intends that it shall not take effect until after his death, and it is dependent upon his death for its vigor and effect, it is testamentary.” (Wonnacott v. Loewen, 44 BCLR (2d) 23 (B.C.C.A.) referencing Cock v. Cooke (1866), L.R. 1 241 (P. & D.) at p. 243).

[12] The applicants submit that the two-part test for a testamentary disposition is met. First, the deceased’s beneficiary designation gifting his RRIF and TFSA was of no force and effect until the time of his Second, the deceased retained complete control over the RRIF and TFSA during his lifetime. The applicants also rely on Morrison Estate (Re), 2015 ABQB 769 (at paras. 45, 46, 50, 51), which held that the beneficiary designation under a RRIF was the equivalent of a testamentary disposition under a will. The applicants concede that the beneficiary designation forms by which the respondent was paid the RRIF and TFSA funds were not executed in compliance with the formalities of the Wills Act. However, they say that any concern in this regard is addressed by the broad discretion of the court reflected under section 23 of the Wills Act to recognize a document as a testamentary disposition where the court is satisfied that it embodies the testamentary intention of the deceased. In support of the applicants’ position, their counsel points to the following comments of Justice Graesser in Morrison Estate (Re) (at paras. 50 – 51):

If there was some expectation that requiring formalities would ensure that the testator obtained appropriate advice before completing a will or codicil, that is entirely undone by the law respecting holograph wills.

I ask rhetorically, if a few handwritten notes on the back of a cigarette package signed by the testator is a valid testamentary instrument and not subject to the law relating to resulting trusts, why should a beneficiary designation signed and witnessed (presumably by a knowledgeable investment advisor) be treated differently?

[13] The respondent argues that under the BDA, the RRIF and TFSA are each a “plan” and the benefits that she received from the RRIF and the TFSA, as the deceased’s designated beneficiary in these RRIF and TFSA documents, are pursuant to “instruments” signed by the deceased prior to his death, and not under a “will”. Of key importance, the respondent says that section 2 of the BDA draws a distinction between a designation by “instrument signed by the participant” and the participant’s will, such that the RRIF and TFSA documents cannot be both.

[14] For the following reasons, I agree with the respondent’s

[15] Even with the invocation of section 23 of the Wills Act, the applicants do not suggest that the RRIF and TFSA documents, which contain the beneficiary designation, be converted into a will for the purpose of the Wills Act, and be submitted for As such, while the deceased’s beneficiary designations meet the common law description of a testamentary disposition, they serve no value for the purpose of the Wills Act.

[16] On the other hand, the RRIF and the TFSA clearly meet the definition of a “plan” as defined in section 1 of the BDA, and are thus subject to the legislative scheme of the BDA. Section 1 of the BDA includes in the definition of “plan”:

(c)   a TFSA (tax-free savings account), retirement savings plan or retirement income fund as defined in the Income Tax Act (Canada).

[17] Section 2 of the BDA provides the following three methods that a plan participant may designate a person to receive a benefit payable under a plan on the participant’s death:

(a) by an instrument signed by the participant;

(b) by an instrument signed by another on the participant’s behalf, in the participant’s presence and on the participant’s direction; or

(c) by will.

[18] The legislature is presumed to have a mastery of existing law, both common law and statute law (Ruth Sullivan, Sullivan on the Construction of Statutes, (6th ) (Markham: LexisNexis Canada Inc., 2014) at §. 8.9 – 8.11). Therefore, it may be presumed that the legislature was aware that such benefits payable under a plan on the participant’s death are a testamentary disposition. Section 2 of the BDA provides the three methods, as enumerated above, by which this testamentary disposition may be made. As such, for the purpose of this testamentary disposition, the BDA draws a distinction between an instrument signed by the participant in subsection 2(a) and a will in subsection 2(c).

[19] An instrument signed by the participant is different from a will. The applicants’ counsel argued that the terms “instrument” in subsection 2(a) and “will” in subsection 2(c) are used interchangeably and treated as equivalent in the BDA. However, such an interpretation would run afoul of the presumption against tautology described in Placer Dome Canada v. Ontario (Minister of Finance), 2006 SCC 20, [2006] 1 S.C.R. 715 (at para. 45):

‘[E]very word in a statute is presumed to make sense and to have a specific role to play in advancing the legislative purpose’…. To the extent that it is possible to do so, courts should avoid adopting interpretations that render any portion of a statute meaningless or redundant…. [citations omitted]

(See also, Sullivan on the Construction of Statutes, at §. 8.23)

[20] Indeed, certain sections of the BDA apply to a designation of a person to receive a benefit payable under a plan on the participant’s death by instrument, while other sections apply to a designation by Sections 2 to 13 of the BDA have specific provisions on how to make, and revoke, such a designation, both by instrument and by will. By virtue of these provisions, the BDA plainly draws a distinction between a designation by instrument and by will. Several of these sections deal with the effect of a will and an instrument on each other, and, in so doing, use language that treats a designation made by instrument as different from a will. This is apparent, for example, in section 4 of the BDA, which provides as follows:

Subject to section 12, a revocation in a will of a designation made by instrument is effective to revoke the designation only if the revocation relates expressly to the designation, either generally or specifically. [Underlining with emphasis added]

[21] If the term “instrument” is equivalent to the term “will” as suggested by the applicants’ counsel, the foregoing section would be non-sensible.

[22] Similarly, if “instrument” and “will” are used interchangeably under section 2 of the BDA as argued by the applicants’ counsel, would this apply for purposes beyond the reduction of the preferential share sought by the applicants under subsection 2(4) of the ISA? For example, would an instrument signed by a plan participant be subject to the provision on revocation of a bequest on divorce in subsection 18(2) of the Wills Act? Subsection 18(2) of the Wills Act includes that, where in a will a bequest of a beneficial interest in property is made to the spouse of the testator, and after the making of the will and before the death of the testator, the testator’s marriage to that spouse is terminated by a decree absolute of divorce, then, unless a contrary intention appears in the will, the bequest is revoked. However, such a conclusion would appear inconsistent with the existence and wording of the designation and revocation provisions in the BDA (sections 2 to 13). For example, section 13 of the BDA mandates that any form furnished to a participant by the administrator of a plan for use in making a designation shall contain a caution that the designation of a beneficiary by means of a designation form will not be revoked automatically by any future

[23] I am unable to find that it was the legislature’s intention to treat an instrument as a will. The BDA contains an entire scheme governing plans. This includes, in section 2 of the BDA, the specific ability for a plan participant to designate a person to receive a benefit payable under a plan on the participant’s death by an instrument signed by the participant, as a separate method from doing so by will. That is, this legislative scheme under the BDA, while permitting the designation of a beneficiary by will, also as a separate method, permits the designation of a beneficiary by an instrument signed by the plan participant. In this context, it is my view that it would thwart the legislature’s intention to treat such a designation by instrument as a If the legislature intended there to be a reduction from a surviving common-law partner’s preferential share under subsection 2(4) of the ISA of the value of benefits received by the surviving common-law partner from a RRIF or TFSA on the plan participant’s death pursuant to an instrument signed by the participant, I expect that the ISA would have said so.

[24] The circumstances outlined in Morrison Estate (Re) are patently distinguishable from those in the case at hand, wherein Justice Graesser noted that his approach “may be viewed as extraordinary” so as to provide an adequate remedy (at para. 110).

[25] In the circumstances of the case at hand, I find that:

  1. Neither the beneficiary designation in the RRIF nor in the TFSA documents are a will as this term is used in subsection 2(4) of the ISA;
  2. Under section 1 of the BDA, the RRIF and the TFSA are each a “plan”;
  3. The related documents that the deceased completed and signed prior to his death for each of the RRIF and the TFSA are each “an instrument signed by the participant” under subsection 2(a) of the BDA;
  4. The funds received by the respondent from the RRIF and the TFSA were benefits payable under a plan on the participant’s death by an instrument signed by the participant under subsection 2(a) of the BDA, and not by will under subsection 2(c) of the BDA; and
  5. Such an instrument signed by a plan participant is not equivalent to a will.

[26] Accordingly, I also find that there is to be no reduction under subsection 2(4) of the ISA of the amount equal to the value of the benefits received by the respondent under the RRIF and TFSA from the respondent’s entitlement to a preferential share of the deceased’s estate under subsection 2(3) of the ISA.

PROVISIONAL ASSESSMENT OF REDUCTION

[27] In the event that my finding is determined to be incorrect, I have provisionally assessed the amount of the reduction under subsection 2(4) of the ISA. As noted, this reduction under subsection 2(4) of the ISA is “an amount equal to the value of any benefits received by the surviving … common-law partner under a will of the deceased”. There is no dispute about the value of the benefits received by the respondent from the However, it is the respondent’s position that the reduction under subsection 2(4) of the ISA ought to reflect the tax liability to be incurred as she withdraws these funds from her RRIF, into which the deceased’s RRIF funds were transferred.

[28] The respondent relies on affidavit evidence that she filed from a chartered professional accountant regarding this tax liability. The applicants have not filed any evidence regarding this tax liability and their counsel has not cross-examined the respondent’s chartered professional accountant on his affidavit evidence. The applicants’ counsel argues that the reduction in the value of the RRIF benefits as suggested by the respondent, should not be applied as the evidence on which it is based from the respondent’s chartered professional accountant is essentially unreliable. The applicants’ counsel argues that the chartered professional accountant’s opinion assumes the highest marginal tax rate and his opinion does not adequately take into account that these RRIF funds will be withdrawn over time. The applicants’ counsel argues that the chartered professional accountant’s opinion does not reflect the tax-free investment growth that will occur which will offset or eliminate the tax liability of the value of the RRIF benefits received by the respondent over her Moreover, the applicants’ counsel argues that there is no statutory provision that would allow the court to consider potential future tax liability in the context of a reduction to the preferential share under subsection 2(4) of ISA.

[29] For the purpose of the amount of the reduction under subsection 2(4) of the ISA, the question is “the value of any benefits received by” the surviving common-law partner. In my view, the words “value” and “benefits received” indicate that it is not the amount received, but its worth. Here, the only evidence is from the respondent’s chartered professional accountant that the respondent will have a tax liability of between $78,857 and $87,590, which he deposed reduces the actual value of the RRIF. The chartered professional accountant opined that the present value of this tax stream is a range of these amounts. In my view, as a result, this tax liability reduces the value of any benefits received by the respondent from the RRIF. Recognizing the chartered professional accountant’s qualification in his opinion that it is difficult to estimate the actual taxes that will arise on these RRIF funds over the respondent’s lifetime as this will depend on a number of factors, most importantly, her lifespan, having regard to all of the circumstances, including those identified by the applicants’ counsel, I am taking the mid-point of these amounts, which is $83,223.50. As such, for the purpose of a reduction under subsection 2(4) of the ISA, the amount equal to the value of the benefits received by the respondent under the RRIF is $171,607.90 ($254,831.40 less $83,223.50). There is no dispute that receipt of the funds from the TFSA does not result in a tax liability. As such, for the purpose of a reduction under subsection 2(4) of the ISA, the amount equal to the value of the benefits received by the respondent under the TFSA is $38,072.73, which is the full amount received by her.

COSTS

[30] It is the respondent’s position that, as the successful party, costs are payable by the applicants to her and that these costs are not payable from the estate. The respondent points out that prior to the filing of this application, the applicants’ counsel was provided with the respondent’s counsel’s opinion, which is consistent with the respondent’s argument that ultimately prevailed. In turn, it is the applicants’ position that the costs should be paid on a pro rata basis from the estate because this was a bona fide dispute about which the respondent administrator should have sought court advice and direction.

[31] The law governing the payment of costs from an estate in the context of estate litigation is summarized in McAuley Genaille, 2017 MBCA 69, where Pfuetzner J.A. wrote as follows (para. 83):

Historically, the traditional rule in estate litigation was that the costs of all parties were payable from the estate. However, this rule has given way to a more modern approach that seeks to discourage needless litigation. Unless certain public policy considerations apply to the litigation, the normal civil litigation costs rules will generally apply. The public policy considerations that support an order for all parties’ costs to be paid from the estate are where the litigation was considered necessary either: (1) due to issues created by the testator; or (2) to ensure that estates are properly administered. … [citation omitted]

[32] In the case at hand, neither of the public policy considerations that support an order for costs to be paid from the estate apply. As such, here, the normal civil litigation costs rules apply. It follows that costs be paid by the applicants as the unsuccessful There is nothing about the circumstances of this case that would justify costs either above or below the applicable tariff. In the circumstances, I am ordering costs in favour of the respondent, as the successful party, against the applicants, as the unsuccessful parties, in accordance with the applicable tariff.

CONCLUSION

[33] In conclusion, I find that the respondent’s preferential share of the deceased’s estate, to which she is entitled as the deceased’s surviving common-law partner under subsection 2(3) of the ISA, is not to be reduced under subsection 2(4) of the ISA by an amount equal to the value of the benefits she received as the deceased’s designated beneficiary under his RRIF and TFSA. In the event that this finding is determined to be incorrect, I have provisionally assessed the amount of the reduction under subsection 2(4) of the ISA to be $171,607.90 for the RRIF and $38,072.73 for the TFSA. I am ordering costs in favour of the respondent against the applicants, in accordance with the applicable

                                                                             A.C.J.Q.B.

[1] https://welpartners.com/blog/2020/05/reducing-a-surviving-spouses-preferential-share-on-a-partial-intestacy/.

[2] 2020 MBQB 34.

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